India Deepens Germany Trade Ties in Global Push

As the 10th anniversary of Brexit approaches this summer, recent polls suggest nearly 6 in 10 Britons want to rejoin the European Union. Prime Minister Keir Starmer has begun speaking vaguely about a "closer alignment" between the UK and the European single market. Both he and the EU can and should think more boldly.

Starmer's recent comments were spurred by chatter from his own Labour Party about rejoining the EU's customs union. That would eliminate costly "rules of origin" declarations and make tariff-free trade unconditional. But most post-Brexit trade costs stem from nontariff barriers — regulatory inspections, declarations, safety checks, excise duties and the like. As long as the UK remains outside the EU's single market, those stay. Britain would also have to modify a range of recent trade deals, including with the successor to the Trans-Pacific Partnership.

Few Britons want another constitutional brawl over sovereignty and immigration, and Labour has ruled out reversing Brexit or rejoining the single market. But settling for such half measures isn't the answer. What's needed is a broader trade agreement that encourages tighter UK-EU integration without requiring Britain to accept the free movement of people, which remains politically toxic.

The EU has recognized the need for flexibility in the past. Switzerland credits its own bespoke arrangement — over 100 bilateral accords including tariff-free trade, cooperation in electricity markets and Swiss participation in EU research programs — with boosting economic growth and competitiveness. While Switzerland doesn't get to vote on the EU laws it must comply with, it sets its own rules in areas such as monetary policy and trade policy that fall outside its EU partnership.

Getting there won't be easy. EU leaders would much prefer an off-the-shelf plan, and they don't want to seem to reward Britain for leaving the single market. Parochial interests are still influential: France recently blocked a British bid to join a Europe-wide defense financing program in order to protect domestic suppliers. Meanwhile, a loud pro-Brexit minority is already howling at the idea of accepting any EU regulatory constraints.

But such intransigence harms both sides. A recent National Bureau of Economic Research study estimated that, by 2025, Brexit had shrunk British GDP per capita by 6% to 8% while reducing investment by 12% to 18%; the country badly needs stronger growth and better access to the European market. Europe, meanwhile, faces an unreliable, if not actively bullying, ally in the US, a growing Russian threat, a weak defense industrial base and the rise of far-right parties. It can hardly afford to shun the region's second-largest economy, a military power that's already deeply embedded in European supply chains.

Rather than quibble further, both sides should acknowledge they need each other. The first step is to quickly finalize last year's "reset" deals, aimed at easing health checks on food, animals and plants, improving cooperation on defense, and providing greater mobility for young people.

Next, they should open talks on additional ways to ease border frictions, lowering compliance costs, and improving competitiveness for both British and European firms. The EU could accept shared product-safety testing, agree that architects, doctors and other professionals can have their qualifications recognized across Europe, and allow single sets of safety data or approvals for chemicals, cars and medicines; Britain would keep its rules closely aligned. UK defense companies should play a larger role in the continent's defense buildup.

If nothing else has over the last decade, the upheaval of the past year should make clear to European and British leaders that their nations' prosperity and security cannot be unlinked. Their task is to champion that future, not apologize for it.

Source: Bloomberg Europe

When the U.S. government releases its 2025 trade data, the numbers are unlikely to please President Donald Trump. Despite his focus on tariffs to shrink the trade deficit, the data shows the opposite trend. In the first 10 months of 2025, the U.S. goods deficit grew by $77 billion, an increase of nearly 8 percent year-over-year.

This widening gap will likely prompt a search for the main culprit, but for the first time in recent history, the answer isn’t China. Instead, the European Union has become the largest source of the U.S. trade deficit, reaching approximately $190 billion in the first three quarters of 2025. During the same period, the deficit with China shrank by 28 percent to $175 billion, while the EU’s surplus remained stable.

This shift could trigger a direct confrontation with the EU. Based on the administration’s recent actions, three potential strategies could emerge, creating major wild cards for trans-Atlantic relations in 2026: weakening the dollar, shifting defense costs to Europe, and cutting strategic deals with Russia.

Wild Card 1: Forcing a Weaker Dollar

A 2024 essay by U.S. Federal Reserve Board member Stephen Miran outlines the logic for a future trans-Atlantic trade battle. The core argument is that an overvalued dollar hurts the U.S. by making imports artificially cheap and exports too expensive. The solution, therefore, might be to deliberately weaken the dollar. Goldman Sachs has flagged this as a key scenario to watch in 2026.

One way to achieve this would be to compel foreign nations to sell their holdings of U.S. Treasury securities. The upcoming G-7 summit in Evian, France, in June presents a perfect opportunity. Collectively, EU countries own about one-fifth of all foreign-held U.S. Treasurys. At the summit, Trump will meet with the leaders of Britain, France, Germany, and Japan—the four largest global holders of this debt.

He could use the meeting to demand they sell their U.S. debt or face punitive measures. If the G-7 complies, his focus could then shift to other major holders like China at the G-20 summit in Florida later in the year.

For Europe, this demand would be a nightmare. European-held U.S. Treasurys are owned by a diverse mix of central banks and private funds, making a coordinated response nearly impossible. Furthermore, a sharp fall in the dollar would cause the euro to appreciate, devastating European exporters. With nearly one-third of EU exports invoiced in dollars, a weakening greenback is a greater fear than U.S. tariffs. In 2025 alone, the dollar lost about 12 percent of its value against the euro, and a further slide would be disastrous.

Wild Card 2: A New Burden-Sharing Network

The Trump administration's 2025 National Security Strategy contains another alarming element for Europe. The document proposes a new "burden-sharing network" where NATO allies would contribute more to military expenses.

This demand may surprise many European policymakers who believed the issue was settled. In June 2025, NATO members pledged to spend 5 percent of their GDP on defense by 2035, a commitment many EU capitals saw as final.

The strategy document clarifies how this network would function:

• U.S.-Led: The network would be entirely controlled by Washington.

• Pay-to-Play: Contributing to the network would unlock benefits, such as relief from U.S. tariffs and discounts on American military equipment.

The U.S.-hosted G-20 summit could be the moment these demands are officially made. Washington’s decision to invite Poland as the only non-G-20 member is strategic. In 2025, Poland spent nearly 4.5 percent of its GDP on defense, making it NATO's largest military spender by that measure. Trump could use Warsaw as a model to pressure other allies into joining his proposed network.

Wild Card 3: Strategic Deals with Russia

A final wild card involves negotiations with Russia and Ukraine. The National Security Strategy emphasizes a resource-centric foreign policy focused on securing critical minerals and expanding fossil fuel production. This opens the door for Trump to make deals with Moscow that benefit U.S. companies at the expense of their European rivals.

Squeezing Europe on Minerals and Energy

Russia is a dominant global supplier of several critical minerals, including:

• Palladium (42% of global supply)

• Antimony (23%)

• Vanadium (19%)

• Platinum (12%)

• Magnesite (11%)

A deal giving U.S. firms preferential access to Russian palladium and titanium would put European automotive and aerospace industries in a vulnerable position, as the EU relies on Russian supplies for these materials.

On fossil fuels, recent Russian decrees suggest a pathway for U.S. energy companies to return. In August 2025, Moscow authorized foreign firms to return to the Sakhalin-1 oil and gas project. U.S. giant ExxonMobil, which held a 30 percent share before its $4.6 billion investment was seized in 2022, stands to benefit. In December 2025, a decree from Russian President Vladimir Putin extended the deadline for ExxonMobil to sell its stake by a year, to 2027.

Washington knows that a complete lifting of sanctions on Russia is unlikely, as they are supported by the G-7, Britain, Canada, and Japan. However, this could work to the U.S.'s advantage. The administration could issue sanctions waivers to American companies like ExxonMobil, allowing them to invest in Russia while European competitors remain locked out. This approach mirrors the licenses Chevron has received to operate in Venezuela since 2019.

Preparing for an Unpredictable Year

As French scientist Louis Pasteur noted, "Luck only favors the prepared mind." Washington’s surprise seizure of Venezuelan leader Nicolás Maduro on January 3 is a stark reminder of its capacity for unpredictable action. As European leaders plan for 2026, preparing for these wild-card scenarios is essential. While it may be difficult to change Trump's course, proactive planning could help the bloc avoid being caught completely by surprise.

Nevertheless, GBP/NZD trades above its key moving averages, including the nine-day exponential moving average (EMA), which is still pointing up:

Source: Poundsterlinglive

The era of employee leverage in Europe, defined by the "Great Resignation" and "Quiet Quitting" that followed the pandemic, is decisively over. A combination of industrial pressure, slowing wage growth, and the looming impact of artificial intelligence is rapidly shifting the balance of power back to employers, ushering in a new period of caution and uncertainty for the continent's workforce.

During and immediately after the COVID-19 pandemic, European workers held a rare advantage. Government support programs helped companies retain staff, while a global labor shortage increased demand for talent. In 2022, research from McKinsey revealed that a third of European workers were considering leaving their jobs within months. Angelika Reich, a leadership advisor at Spencer Stuart, described this as a "striking figure for a region with a traditionally low [staff] turnover."

That moment has passed. The European labor market has "cooled down," Reich noted, and a tougher economic climate is making employees more hesitant to switch jobs.

Eurozone Job Growth Is Slowing Down

While Europe's labor market has shown resilience, its momentum is fading. The European Central Bank (ECB) projects that employment growth in the 21-member eurozone will slow to 0.6% this year and 0.7% in 2025.

Though the annual change seems minor, each 0.1 percentage point represents approximately 163,000 fewer new jobs. This stands in stark contrast to just three years ago, when the eurozone was creating 2.76 million new jobs annually with a robust growth rate of 1.7%.

Migration, which previously helped ease worker shortages and fuel job growth, is now stabilizing or declining, adding another layer of complexity to the labor supply. The new mood has given rise to fresh terminology, such as the "Great Hesitation," where firms delay hiring and workers avoid quitting, and "Career Cushioning," where employees quietly prepare for potential layoffs.

A person stands before a directory at a German job center, illustrating the growing pressure on the country's labor market.

Germany's Industrial Woes Signal Broader Trend

Germany's economic struggles are setting the tone for much of the continent. According to the IW economic think tank in Cologne, more than one in three German companies plans to cut jobs this year.

This trend is reflected across other major European economies:

• France: The Bank of France expects unemployment to rise to 7.8%.

• United Kingdom: Two-thirds of economists surveyed by The Times believe unemployment could climb as high as 5.5% from its current 5.1%.

• Poland: Unemployment reached 5.6% in November, up from 5% a year earlier.

• Romania and the Czech Republic: Both nations are experiencing similar increases in joblessness.

Workers assemble a vehicle at a Volkswagen facility, a sector central to Germany's industrial base that has announced significant layoffs.

Manufacturing Sector Under Pressure

Germany's industrial base has been hit particularly hard, losing over 120,000 positions in sectors like automotive, machinery, metals, and textiles. The key drivers are high energy costs, weak export demand, and intense competition from China.

These pressures are not unique to Germany; manufacturers in France, Italy, and Poland face similar challenges. The eurozone's Manufacturing Purchasing Managers' Index (PMI) fell to 48.8 in December, its lowest point in nine months. A reading below 50.0 indicates a contraction in industrial activity. Julian Stahl, a labor market expert at XING, observed that "most firms are aiming to hold the line or shrink slightly rather than grow," though he added that hiring has not "stopped completely."

The negative headlines are also creating a reputational problem. Bettina Schaller Bossert, president of the World Employment Confederation, noted that many young graduates now believe there is "no future in the automotive sector," despite new opportunities emerging within it.

Some Economies Continue to Outperform

The picture is not uniformly bleak. Several European countries are bucking the trend, with Spain leading the way thanks to a post-COVID tourism boom. According to the European Centre for the Development of Vocational Training, an EU agency, strong job growth is also expected in:

• Luxembourg

• Ireland

• Croatia

• Portugal

• Greece

Even in weaker economies, demand remains high in specific fields. "What felt like a widespread scarcity of workers during the Great Resignation has become more sector-specific," Stahl explained. "There are still serious shortages in retail, health care, logistics, engineering and other highly specialized roles."

The Shadow of AI: Reshaping the Workforce

While Europe has adopted AI more slowly than the United States and China, anxiety about automation replacing human jobs is widespread. A July study by consulting firm EY found that a quarter of European workers fear AI could put their jobs at risk, and 74% believe companies will need a smaller headcount as a result of the technology.

Projections for an AI-Driven Future

In November, Germany’s Institute for Employment Research (IAB) projected that 1.6 million jobs in the country could be reshaped or eliminated by AI by 2040. While high-skilled positions are expected to be disproportionately affected, the tech sector could generate around 110,000 new roles.

Enzo Webe, head of the IAB's forecasting department, anticipates a "transformation" of the labor market but "not less work." Other forecasts vary widely, from the rise of an "AI precariat"—a class of people left jobless and without purpose—to more optimistic scenarios where AI redistributes tedious tasks rather than eliminating professions.

"A lot of drudge tasks can be pushed to AI to free up human labor," said John Springford of the Centre for European Reform. "But there's a good reason to believe that professional, knowledge work won't shrink."

For many workers, the rapid advance of AI may become the kind of "jolt" described by University College London professor Anthony Klotz, who coined the term "Great Resignation." He argues that such jolts—sudden moments of clarity—are what prompt people to quit. AI could be the catalyst that encourages European workers to make their next career move before automation makes it for them.

An effort by Europe to stand up to China and retain local technology is approaching a breaking point.

In a fight over a critical link in the global supply chain, chipmaker Nexperia BV was wrested away from its Chinese owner by a Dutch court and now one of the leaders in so-called legacy chips is racing to defend its independence. If the Nijmegen-based company is successful, Europe would hold on to valuable semiconductor manufacturing expertise and hand the region a rare victory over China.

By pushing back over Nexperia, Europe aims to "set a precedent for what 'de-risking' means," said Benedetta Girardi, program coordinator at the Hague Centre for Strategic Studies, referring to Europe's objective of reducing dependencies on China. The intention is to show that Europe "wants sovereignty and autonomy as part of the conversation" over tech, even as it seeks to maintain trade relations with a key partner.

Since a Dutch court intervened in Nexperia's ownership in October, the standoff has threatened to disrupt auto production in Europe and around the world. On one side, there's the core of the company, which is in the hands of court-appointed trustees in the Netherlands; the other side is a key production site that's aligned with dispossessed owner Wingtech Technology Co. — an electronics firm that's 30%-owned by entities close to the Chinese state.

As Nexperia seeks to expand non-Chinese production capacity, Wingtech has stepped up efforts to regain control over the chipmaker it's owned since 2019. It has initiated talks with the court-appointed trustees to try to settle the dispute, while also appealing to the Dutch supreme court over the suspension of its ownership rights.

A court hearing on Wednesday will determine whether there's a quick resolution or a drawn-out legal tussle. The Amsterdam court could order an investigation into the chipmaker if it sees reasons to doubt how Nexperia was managed. On the flipside, the measures taken against Wingtech's ownership of Nexperia and its founder could be dropped if the court opts against a probe.

The hearing is expected to have wide-ranging implications not just for Nexperia's future, but the sustainability of the automotive supply chain and geopolitical ties.

Behind the scenes, meanwhile, the two Nexperias are preparing for a potential future without the other. For Nexperia China, that means finding alternative sources of wafers — the thin, flat slices of semiconductor material that's usually made of silicon. For the Dutch parent, it means expanding other production sites to have enough capacity to meet customer demand. Both efforts are complex.

"Facing the predicament arising from the improper interference by the Dutch government, Nexperia China has actively carried out 'production self-rescue'," including procuring wafers elsewhere, Wingtech Chairwoman Ruby Yang told Bloomberg in an interview.

"Our wafer procurement cooperation in the Chinese market is a natural extension of this strategy," she said, adding that the initiative is aimed at improving operations "rather than serving as a wholesale replacement for the existing supply chain."

According to Yang, the Dutch side is investing about $300 million to expand other facilities with the goal of having 90% of its production capacity outside China by mid-2026. The projects demonstrate "a clear intent to de-couple from China," she said.

The expansion plans at Nexperia's sites in Malaysia and the Philippines aim to add tens of billions of units to annual capacity, according to people close to the situation. The company confirmed efforts to "accelerate existing capacity-expansion plan​s" but declined to comment on specific figures or targets.

With some Nexperia rivals such as US-based OnSemi signaling that they could scale up to take over Nexperia's orders, there's pressure to act fast and there's little margin for error.

The messy dispute has prompted banks to withdraw hundred of millions of dollars of financing to Nexperia, including an untapped $800 million revolving credit line, said the people, who asked not to be identified since the discussions are private. The chipmaker said it is "debt-free and has a strong liquidity position, which is unaffected by events in recent months," a spokesperson said in response to Bloomberg questions.

The acrimony publicly emerged in October when a court in Amsterdam ordered Wingtech's ownership rights placed in a trust over allegations the firm was improperly transferring technology from Europe to China. It also suspended Wingtech founder Zhang Xuezheng as Nexperia's chief executive officer on claims he was diverting resources to affiliated companies and hobbling the Dutch chipmaker. Wingtech has denied wrongdoing.

The court decision prompted Nexperia's site in Guangdong — which has capacity for over 50 billion units a year, or about half of the group's pre-crisis production — to stop cooperating with its parent in the Netherlands, which in turn halted wafer deliveries to China.

Alongside the internal corporate feud, the Dutch and Chinese governments stepped in. The Netherlands imposed oversight powers on national security grounds and Beijing restricted Nexperia's exports from China. The political spat eased after deliveries were allowed to resume, but China continues to press for the Dutch to back down.

"There is clearly an intention to turn Wingtech into kind of a future champion," said Mathieu Duchâtel, director of international studies at think tank Institut Montaigne. "For the Europeans, what it showed is the key importance of having safe access to assembly capacity, which is clearly a weak point."

While Nexperia is a bit player in the global semiconductor industry, its importance is in its ability to produce chips that perform simple functions like controlling power supply at high volumes — about 3,000 components every second. While they're low-tech, the components are used in almost every electronic device.

Nexperia's operations are set up for an era of seamless global commerce. Wafers from facilities in Germany and the UK are shipped for testing and assembly to sites in China, Malaysia and the Philippines. From there, finished components are delivered to customers around the world, including back to Europe.

Concerns about supplies has spurred some big customers — such as auto-parts supplier Robert Bosch GmbH — to shuttle wafers from Nexperia facilities in Europe to China, according to people familiar with the matter. The process is costly and complex and consequently not seen as a long-term solution, the people said.

As part of its expansion plans, the Dutch parent has held talks with customers on investing in Nexperia's sites in southeast Asia, the people said.

A Bosch spokesman declined to comment on supplier relationships for competitive reasons, but said the company remains in close contact with Nexperia and is working to minimize any production constraints.

Shortages of Nexperia chips have caught automakers by surprise. Honda Motor Co. halted production at several plants, while Volkswagen AG and others scrambled teams to secure alternatives. Top parts supplier ZF Friedrichshafen AG reduced output.

To avoid a similar choke point in the future, European nations are discussing how to subsidize backend production outside of China, a person familiar with the matter said. At the same time, China also faces pressure from the country's carmakers, including BYD, to ensure stable supply, according to people briefed on the matter.

Even if one or both Nexperias survive or find a way to reconcile, the brand's reputation has been damaged and that could be hard to repair and creates longer term uncertainties.

"As countries jockey for control over different stages of the semiconductor value chain, it's going to lay out these potential breaking points," said Jacob Feldgoise, senior data research analyst at Georgetown University's Center for Security and Emerging Technology. "The risk associated with this situation was really not on anyone's radar."

Source: Bloomberg Europe

Federal Reserve Chair Jerome Powell has accused the Trump administration of using the threat of criminal charges as a form of political pressure, framing it as a direct challenge to the central bank's independence for refusing to align monetary policy with the former president's wishes.

In a rare public statement on Sunday, Powell revealed that the Department of Justice had issued grand jury subpoenas to the Federal Reserve. The subpoenas are officially linked to his testimony before the Senate Banking Committee last year concerning a multiyear renovation project of historic Fed buildings.

However, Powell asserted that the legal action is not truly about the renovation. "Those are pretexts," he stated, arguing that the threat of indictment is a direct result of the Fed setting interest rates based on economic data rather than political demands from the executive branch.

Powell positioned the conflict as a fundamental test of whether U.S. monetary policy will remain independent or be shaped by political intimidation.

A Legal Probe or Political Retaliation?

The conflict between the White House and the Federal Reserve has escalated into a direct legal confrontation, raising questions about the motivations behind the investigation. Powell, while emphasizing his respect for the rule of law, was clear that he views the legal action as a politically motivated campaign.

The subpoenas focus on his prior testimony about the Fed's building renovations, but Powell insists this is a smokescreen. He contends the real issue is the central bank's refusal to bow to political pressure on interest rate decisions, a stance that has put him at odds with Donald Trump for years.

The Long-Simmering Feud Over Interest Rates

This latest development revives a years-long conflict between Powell and Trump. During his presidency, Trump repeatedly and publicly criticized the Fed for maintaining interest rates at levels he considered too high, arguing they were undermining economic growth.

Trump openly considered removing Powell from his position and consistently pressured the central bank to implement more aggressive rate cuts. Despite being appointed by Trump in 2018, Powell consistently resisted these demands, emphasizing the Federal Reserve's statutory independence and its dual mandate to ensure price stability and maximum employment. These sustained attacks from a sitting president were widely seen as an unprecedented effort to influence U.S. monetary policy.

Powell noted that he has served under four different administrations from both political parties and has always performed his duties "without political fear or favor."

Market Ripples and Questions of Credibility

The legal escalation introduces a new layer of uncertainty for financial markets, which are already navigating a complex landscape of fiscal policy, rising government debt, and central bank actions.

Jimmy Xue, co-founder and COO of Axis, told Yellow.com that these proceedings could challenge the Fed's autonomy at a time of growing fiscal dominance. According to Xue, attacks on central bank independence enhance the appeal of assets like Bitcoin, which operate outside of direct political and legal influence. He noted that as concerns grow over policy being driven by executive pressure, institutional investors are increasingly looking to Bitcoin's fixed supply as a hedge against potential currency debasement.

A Broader Test for Institutional Independence

Powell framed the situation as a critical test that extends beyond his own position or the Federal Reserve itself. He described it as a defining moment for whether independent American institutions can operate without facing political coercion.

He asserted that public service sometimes requires standing firm against threats and vowed to continue carrying out the duties for which he was confirmed by the Senate. This confrontation marks one of the most direct clashes between the White House and the Federal Reserve in recent history, carrying significant implications for U.S. monetary policy and the global financial system's confidence in America's institutional guardrails.